Coalition of State Medical Associations letter to the U.S. Senate on budget reconciliation

Dear Majority Leader Thune, Leader Schumer, Chairman Crapo, and Ranking Member Wyden,

On behalf of the undersigned State Medical Associations and the District of Columbia, representing hundreds of thousands of physicians and the 80 million Medicaid patients we serve, we are writing to urge the Senate to reject the damaging cuts to Medicaid, Medicare, and medical student loan programs in the Senate Finance Committee draft budget reconciliation bill. These cuts will seriously harm access to health care for all Americans. The Senate plan threatens hospital and physician viability and our patients’ health, particularly in rural communities; creates barriers to medical school and exacerbates physician shortages; and fails to address chronically inadequate Medicare physician payments that are causing serious access to care challenges for America’s seniors. As physicians and stewards of our nation’s health, we urge you to find more balanced solutions that protect the nation’s health and well-being.

Unfortunately, the Senate bill increases the Medicaid cuts by nearly $200 billion over the House cuts – reaching over $900 billion in cuts to Medicaid – and will result in further unnecessary losses of coverage and access to care. Combined with the large Medicare physician cuts, the Senate bill will cause a wholesale shift of uncompensated care to states and an already fraying safety net of physicians, clinics, and hospitals. State budgets will be crippled. Patient conditions will worsen as they wait for hours in emergency departments or months to see a primary care physician and health care costs will increase.

The Coalition urges you to consider the recommendations below.

Medicaid Provider Taxes in 49 States Are Not “Waste, Fraud, and Abuse” These taxes have helped states meet the mountain of increased demand for health care services from an ever-growing population with more serious chronic conditions.

The accusations that Provider taxes are waste, fraud and abuse are unfounded, as these programs have helped millions of people get the medical care they need. Provider taxes have been authorized under federal law, approved by both Republican and Democratic administrations, and affirmed by state legislatures in 49 states for decades. They are a legitimate financing mechanism used by states in partnership with the federal government to fund essential health services and have kept rural hospitals, maternity wards, nursing homes, behavioral health clinics, and physician practices open.

Provider taxes have played a vital role in stabilizing the health care system for both providers and patients because Medicaid consistently pays below the cost of providing care. These funding sources have helped providers across the nation remain accessible to patients during the COVID pandemic, economic recessions, and natural disasters.

If these cuts are enacted, it will create devastating gaps in State budgets that are already experiencing deficits, forcing states to raise taxes, or reduce Medicaid benefits, coverage, and provider payments.These reductions will lead to even more crowding of emergency departments and as the uncompensated care burdens grow from patients losing coverage, many rural hospitals, nursing homes, and community physician practices will be forced to close to all patients. These closures will create widespread health and economic instability, particularly in rural communities. Many of our rural hospitals, often the largest employer in the community, are already at risk of closure and provider taxes have literally kept them open and protected local jobs.

Contrary to some assertions, provider tax cuts will force states to cut benefits and access to care for the traditional Medicaid population of children, veterans, seniors, people with disabilities, and pregnant women.

The additional Senate Medicaid cuts that reduce the safe harbor tax caps from 6% to 3.5% % in the 41 red and blue states that expanded Medicaid, unjustly harms the vast majority of states. Studies show that patient health status improved in these 41 states which also reduced health care costs.

The new Senate Medicare payment caps for State Directed Payments at a percent of Medicare penalizes public hospital systems and physician specialists caring for some of the sickest patients across the nation.

The Moratorium on new provider taxes and a freeze on provider tax levels levels amounts to a long-term funding cut, as the funding will not keep pace with increased health care costs over time brought on by inflation, economic downturns, public health crises and natural disasters. It also inequitably freezes rates in states with lower taxes.

The Uniformity Requirement for all provider taxes on hospitals, nursing homes, and managed care organizations to be equal in each provider category is essentially an elimination of numerous provider taxes across the nation because states would experience extreme difficulty meeting the rules and would need more time to try to restructure or unwind existing programs and services.

Coalition Recommendations:

1. Eliminate Provider Tax Cuts

+ Eliminate the Provider Tax Uniformity Requirement that essentially terminates numerous provider taxes in multiple states because the rules are so difficult to meet. If this provision is not removed, this requirement would necessitate much more time for states to come into compliance or wind down existing services. Section 71122.Contrary to some assertions, provider tax cuts will force states to cut benefits and access to care for the traditional Medicaid population of children, veterans, seniors, people with disabilities, and pregnant women.Contrary to some assertions, provider tax cuts will force states to cut benefits and access to care for the traditional Medicaid population of children, veterans, seniors, people with disabilities, and pregnant women.

+ Eliminate the Senate safe harbor tax rate limits from 6% to 3.5% and the Medicare payment limits on state directed payments. Sections 71120 and 71121.

+ Eliminate the Moratorium on new and increased taxes. Section 77120.

2. Reduce Work Requirement Administrative Red-Tape

Reduce the administrative barriers to demonstrating work status and give states the flexibility to design programs that work best for our states and our Medicaid populations.